Updates to our cold wallet storage policy

In Product

At Liquid, security is in our DNA. We constantly seek best-in-class innovations to strengthen our security and improve our customer experience. A balance is required between security innovation and governance in the crypto industry. This is a risk-based approach that enables us to deploy cutting-edge technologies to protect customer funds while remaining compliant with regulators and setting an example to others in our industry.

Behind the scenes, we have been gradually rolling out Multi-Party Computing (MPC) technology to improve service levels without compromising the security of our clients’ assets.

Today, we are pleased to announce that our integration of MPC technology has passed our internal risk assessments, enabling us to begin fully deploying the technology across our platform, serving various cryptographic assets (including BTC, ETH, XRP, BCH, LTC, TPAY and various ERC-20 tokens) Liquid custodies on behalf of our global customers, excluding Japan residents.

Liquid’s MPC-based wallets have been extensively penetration-tested internally and externally. This advancement in security allows us to reduce our dependence on cold wallet storage to a 90% threshold to drastically improve Liquid’s withdrawal process whilst still maintaining our zero-compromise level of security.

For the Japan market, all customer funds will remain in 100% cold wallet storage in compliance with local regulations in that jurisdiction.

Round-the-clock withdrawals

This means that for global Liquid users, we are now able to process withdrawals multiple times per hour during Japan business hours, with work already begun on providing round-the-clock withdrawals.

MPC-based security allows Liquid to adopt a secure, scalable, distributed model of trust with no singular point of compromise, resolving the dilemma hot versus cold wallets and self-versus-managed custody.

With MPC, the master private key never exists and is always split among multiple entities as encrypted key shares. Unlike Shamir Secret Sharing technology, the key shares are never united into one entity; not at generation, nor at usage.

Transactions from the MPC wallet need to be signed by several key shares, deriving a signature from them, without the private key itself ever existing as one piece. Each key share alone reveals no information about the private key.

We are proud to be one of the first major cryptocurrency exchanges in the world to adopt and embrace MPC technology in a live setting.

By utilizing state of the art technology like MPC, Liquid is improving client service levels, reducing operating costs and eliminating single points of failure. Liquid is preparing for the next wave of investors and market participants that demand the highest levels of security and performance.

This content is not financial advice and should not form the basis of any financial investment decisions nor be seen as a recommendation to buy or sell any good or product. Trading cryptocurrency is complex and comes with a high risk of losing money, particularly if you trade on leverage. You should carefully consider whether trading cryptocurrencies is right for you and take the time to learn how trading works and decide how much money you are prepared to lose.


Seth Melamed

Liquid Global Head of Business Development & Sales.